Redundancy Calculator UK

How Statutory Redundancy Pay Is Calculated

The statutory redundancy formula is based on three variables: your age during each year of service, your total years of continuous employment and your gross weekly pay (subject to a legal cap).

The Three Age Bands

For each full year you worked, you receive a different multiple of a week's pay depending on how old you were during that specific year:

The calculation looks backwards from the date your notice ends, applying the correct multiplier for each year. A maximum of 20 years' service counts, regardless of how long you've actually worked there.

The Weekly Pay Cap (2026 Rates)

From 6 April 2026, the maximum weekly pay figure used in the statutory calculation is £751, confirmed by The Employment Rights (Increase of Limits) Order 2026.

This means if your actual gross weekly pay is £1,200, the formula still uses £751. High earners are often surprised by how modest their statutory figure is as a result. The maximum total statutory redundancy pay you can receive is £22,530.

Worked Example

An employee aged 44 with 8 years' service and a weekly gross pay of £600:

• Years worked aged 41–44 (3 years) → 3 × 1.5 = 4.5 weeks' pay
• Years worked aged 36–40 (5 years) → 5 × 1.0 = 5.0 weeks' pay
• Total: 9.5 weeks × £600 = £5,700 statutory redundancy pay

Since £600 is below the £751 cap, the full weekly pay figure is used. If the same employee earned £1,000 per week, the calculation would use £751 instead: 9.5 × £751 = £7,134.50.

Statutory vs Enhanced Redundancy Pay

Statutory redundancy pay is the legal minimum your employer must pay if you qualify. Many employers, particularly larger organisations or those with collective agreements, offer enhanced (also called contractual) redundancy packages that go above this minimum.

Enhanced redundancy can take several forms: a higher weekly pay figure with no cap, a more generous multiplier per year of service or a lump sum payment regardless of service length. Always check your employment contract, staff handbook or any collective agreement to see if you're entitled to more than the statutory minimum.

If your employer offers enhanced redundancy, both the statutory and enhanced portions benefit from the combined £30,000 tax-free exemption.

Is Redundancy Pay Taxable?

Statutory redundancy pay and any enhanced redundancy pay from your employer, is completely tax-free up to £30,000. You won't pay Income Tax or National Insurance on your redundancy payment up to this threshold.

Anything above £30,000 is subject to Income Tax in the normal way (though not National Insurance).

One point that catches people off guard: the £30,000 exemption applies only to genuine redundancy pay. Other elements of your leaving package are treated differently.

What About Notice Pay and Holiday Pay?

These are separate from your redundancy payment and are always taxed as normal earnings through PAYE:

• Notice pay: If your employer pays you in lieu of notice (PILON) rather than requiring you to work your notice period, this payment is fully taxable as income, regardless of whether your contract included a PILON clause. Since April 2018, all PILON payments are subject to Income Tax and National Insurance under the Post-Employment Notice Pay (PENP) rules.
• Holiday pay: Any accrued but untaken annual leave must either be taken before you leave or paid out as holiday pay. This is also taxed as normal income.
• Final salary: Your last month's wages, bonuses and any other regular earnings are all taxed as normal.

It's worth separating these figures clearly on any redundancy settlement letter, as mixing them up can lead to incorrect tax treatment.

What to Do After Redundancy

Being made redundant opens up several important financial and legal steps worth addressing promptly:

• Check for a tax rebate. If you were made redundant part-way through the tax year, you may have overpaid Income Tax through PAYE. You can claim a tax refund from HMRC, use your P45 and check your tax code.
• Claim Universal Credit or Jobseeker's Allowance if you are not immediately moving into new employment. You can begin your claim on the day your employment ends, don't delay, as claims are not backdated.
• Check your National Insurance record. While receiving Jobseeker's Allowance, you receive NI credits that count towards your State Pension qualifying years. You need 35 qualifying years for the full new State Pension.
• Review your pension. If you were enrolled in a workplace pension, keep a record of your pot details and consider what happens to the employer contributions that were being made.

You have 6 months from the date your employment ends to claim statutory redundancy pay if your employer fails to pay. For contractual redundancy pay claims, the deadline is 3 months.

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